What Is a Statutory Lien?

By Teo Spengler

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When you borrow money, the lender -- whether an individual or a bank --- usually wants to get repaid. Repayment is easier to enforce when the debt is linked to property, which creates a legal arrangement termed a lien. Even if you don't agree to a lien on your property, one can be created by court action or by statute. The latter type is termed a statutory lien.

Consensual Liens

If you are borrowing money, you may agree to secure the debt with a lien. In exchange for the loan, you give the lender the right to recover the debt from specific property. For example, if you take out a home loan, you usually must give the lender a lien against the house you purchased. If you fail to meet your mortgage payments, the lender can sell your house. This kind of lien is called a consensual lien because you agreed to it as part of the loan.

Nonconsensual Liens

Sometimes a lender is entitled to a lien on your property to secure a debt even if you don't agree to it. Generally, these "nonconsensual" liens fall into two categories. One is judicial liens. A judgment lien is created when someone goes to court and gets a money judgment against you. By filing the judgment with the appropriate government agency, the person creates a lien on real estate you own in that jurisdiction. The other type of nonconsensual lien is called a statutory lien.

Statutory Liens

Statutory liens do not result from a court case. They arise from statute. That means that the lien is created under certain circumstances because a law says that in those circumstances, a lien may be created. The classic example of a statutory lien is a mechanic's lien, also called builder's lien. If you don't pay a contractor who works on your house, state statutes give him the right to file a mechanic's lien against your house for the amount he is owed.

Other Statutory Liens

Since statutory liens are created by laws, each jurisdiction may have a different list. For example, some states give a mechanic who works on your car a lien on that car for unpaid repair bills. An owner of storage units may be given a lien on the contents of the unit for unpaid rent. A laundry person may be given a statutory lien on clothing he cleans and irons to secure payment for those services. Likewise, the rights of a person holding a statutory lien depend on the terms of the statute. Some include the right to force sale of the property.

About the Author

From Alaska to California, from France's Basque Country to Mexico's Pacific Coast, Teo Spengler has dug the soil, planted seeds and helped trees, flowers and veggies thrive. World traveler, professional writer and consummate gardener, Spengler earned a BA from U.C. Santa Cruz, a law degree from Berkeley's Boalt Hall, and an MA and MFA from San Francisco State. She currently divides her life between San Francisco and southwestern France.

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